The Australian Competition and Consumer Commission (ACCC) has launched an inquiry into home loan pricing following orders from the federal government.
This will see the competition watchdog probe a wide variety of issues pertaining to home loan pricing. It includes an evaluation on the rates paid by new and existing customers, how the cost of financing for banks has impacted their decisions on interest rates, and why cuts from the Reserve Bank of Australia (RBA) aren’t always passed on in full.
Additionally, the inquiry will consider what stops more consumers changing to cheaper home loans. The ACCC said that the home loan pricing inquiry will cover matters such as consumer decision-making and biases, details used by consumers, and the extent to which suppliers contribute to consumers paying more than they should for home loans.
The competition watchdog said it will have the right to use compulsory information gathering powers to collect decision making documents from financial institutions along with other relevant information.
ACCC chair comments on the home loan pricing inquiry
ACCC chair Rod Sims said: “Having consumers and the community understand how pricing decisions are made, why, and with what consequences is important for a well-functioning market.
“We are looking forward to examining how banks make these crucial decisions. It will be important to understand and examine the different factors that financial institutions take into account when setting their prices.”
The ACCC said that the home loan pricing inquiry will build on its residential mortgage inquiry, which was followed by an inquiry made into foreign exchange services.
To carry out the inquiry, the ACCC will closely consult with the RBA, the Australian Prudential Regulatory Authority, the Australian Securities and Investments Commission, and other financial regulators.
The regulator expects to release a preliminary report of the home loan pricing inquiry by the end of March 2020, while the final report is likely to be published on 30 September 2020.
ANZ CEO Shayne Elliott said: “The inquiry is a good opportunity to provide facts in what is a complex space and we hope it will provide the public with renewed confidence in the way their home loans are priced.
“Despite intense competition, there is cynicism in the broader community about interest rates for home loans. We know we have not done a good job in explaining our position and we will be working hard to ensure this process delivers results.”
